Apple Acquiring the Majority of Intel's Smartphone Modem Business

As rumored, Apple today announced that it has signed an agreement with Intel that will see Apple purchasing the majority of Intel's smartphone modem business.

Approximately 2,200 Intel employees will be joining Apple, and Apple will also take over Intel's related intellectual property, equipment, and leases, in a transaction that's valued at $1 billion. At $1 billion, this is Apple's second largest known acquisition after Beats.

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Combined with Apple's existing wireless technology patents, the Intel acquisition will give Apple more than 17,000 wireless technology patents in total, ranging from "protocols for cellular standards to modem architecture and operation." Apple says that Intel will continue to develop modems for non-smartphone applications, such as PCs, internet-of-things devices, and autonomous vehicles.

Apple's VP of Hardware Technologies Johny Srouji said that Apple is excited to gain new engineers with expertise in modem development, with the Intel team set to join Apple's cellular technologies group.

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"We've worked with Intel for many years and know this team shares Apple's passion for designing technologies that deliver the world's best experiences for our users," said Johny Srouji, Apple's senior vice president of Hardware Technologies. "Apple is excited to have so many excellent engineers join our growing cellular technologies group, and know they'll thrive in Apple's creative and dynamic environment. They, together with our significant acquisition of innovative IP, will help expedite our development on future products and allow Apple to further differentiate moving forward."

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The acquisition, says Srouji, will allow Apple to expedite its development on future products, which likely includes the Apple-designed modem chip that's in the works. To reduce its reliance on Qualcomm and other modem chip suppliers, Apple has been working on developing its own modem chip. That technology won't be ready for another few years, but the acquisition of Intel's modem chip business could allow Apple to significantly speed up its modem chip development.

Intel CEO Bob Swan said that selling Intel's smartphone modem chip business to Apple will allow Intel to putting its 5G efforts into other areas.

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"This agreement enables us to focus on developing technology for the 5G network while retaining critical intellectual property and modem technology that our team has created," said Intel CEO Bob Swan. "We have long respected Apple and we're confident they provide the right environment for this talented team and these important assets moving forward. We're looking forward to putting our full effort into 5G where it most closely aligns with the needs of our global customer base, including network operators, telecommunications equipment manufacturers and cloud service providers."

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Rumors earlier this week suggested Apple was in advanced talks with Intel and that a deal could be announced in the near future. Apple and Intel have been having discussions about an Apple acquisition of its smartphone modem business since last year.

The talks paused temporarily when Qualcomm and Apple settled their legal differences and reached a new supply agreement, but resumed not too long afterwards. Intel announced back in April that it was planning to exit the 5G smartphone business, sharing the new shortly after the new Qualcomm/Apple deal was announced.

Apple was planning to use Intel's 5G chips in its 2020 iPhones because of its legal battle with Qualcomm, but rumors suggested Intel wasn't able to meet design deadlines, souring the relationship between the two companies. Apple mended ties with Qualcomm and will now use Qualcomm's 5G chips in its 2020 iPhones.

Apple has established a deal with Qualcomm for chips for future devices as well, and will likely rely on Qualcomm until its own modem chips are ready to be deployed.

Apple says that it expects the purchase of Intel's smartphone modem chip business to be completed in the fourth quarter of 2019, subject to regulatory approvals and other customary conditions.

This makes the most sense. Apple is the perfect fit for this acquisition. I can see the 5G modem being integrated into the system on a chip in a few years. This will result in superior speed and energy efficiency while keeping the price low. That kind of advantage is something even Qualcomm won't be able to rival.

It's the check in the checkmate. Apple got Qualcomm's lawsuits off their back, paying less for the modems than they would have for a years long lawsuit and potential settlements while giving Apple 5G chips in the near future and buying themselves time to develop their own in house solution. Best possible outcome.

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